What Makes a Fund Manager in Korea?

Fund managers are often called the market makers of the financial capitalist era. Controlling tens of millions of won every day, they fight every second to make better investments and earn hundreds of millions of won in annual income.

Their high salaries make their job extremely attractive to jobseekers just out of college. As of the end of last month, 1,087 fund managers were registered with the Korea Financial Investment Association.

The Dong-A Ilbo commissioned a survey to 68 asset management companies and analyzed 684 fund managers who responded to the study. The results showed that many fund managers majored in engineering and science unlike general expectations.

Fund managers with a degree in business administration accounted for 35.7 percent of the surveyed and those who studied economics comprised 22.4 percent. Yet those with degrees in science and engineering, including architecture, mathematics and industrial engineering, accounted for 20.6 percent, showing that demand for specialists in those areas has risen due to the increasing number of derivatives sold on the market requiring mathematical knowledge.

Though many fund managers started off at securities or asset management companies, a surprising number entered the field after leaving leading companies such as Samsung Electronics, Hanwha and SK Teletech.

A CEO in the asset management industry said, “Companies in all industries, including chemicals, architecture and medicine based on nanotechnology, are listed in the stock market. Those who can spot new trends with in-depth knowledge in a given industry make better fund managers, rather than those who trade stocks based on their instincts.”

○ No more ‘stars,’ just the system

Thirty-nine fund managers of Mirae Asset occasionally receive a warning e-mail saying, “Your fund exceeded the benchmark 15 percent. Please check management status,” at the end of a trading day.

If a fund’s profitability is excessively below or over the benchmark, managers receive such a warning to check whether they bought too many stocks with high volatility, according to Mirae Asset’s Park Jin-ho.

“Fund managers have much less individual discretionary power than in the past,” he said.

This shows that fund managers who deal with tens of billions of won daily as shown on TV dramas are rare. The individual capability of a manager can be unleashed only in the context of the group he belongs to.

Apart from certain executives including Mirae Asset Global Investments CEO Koo Jae-sang, few Mirae fund managers are known publicly. This is a huge departure from a decade ago, when photos of confident fund managers were easily seen on newspaper ads reflecting the start of the fund investment boom.

At Korea Investment Trust Management Fund, managers have to go through three stages in selecting their investment. First, the company’s research arm creates a model portfolio based on which fund managers and analysts gather to pick out strategic portfolios and make the final decision.

Therefore, individual capability accounts for just 20-30 percent in decision making when they work under the portfolio created by the company. Furthermore, individual decisions must gain approval from the chief investment officer.

Korea Investment Vice President Kang Shin-woo said, “If we leave everything to one or two star managers, investors will suffer greatly when their investment profitability plunges or when they move to other companies. The existing structure is much better in preventing misjudgment by fund managers.”

○ Insight and hardworking mentality

Despite the eased burden of public popularity, fund managers face increasing stress over the need to differentiate their investments from other funds since everyone can get a hold of any stock they want.

Shinyoung Investment Management Vice President Lee Sang-jin said, “Practically most companies are being studied by the market. So, it’s extremely difficult to find a new item.”

The competition is not just between fund managers. When they try to buy stocks of a company, individual investors, or “ants” who had such shares, sell them off in many cases.

Therefore, insight is the only answer to differentiation. Korea Investment Value Asset Management Vice President Lee Chae-won said, “Everyone knows that the spread of H1N1 influenza will negatively affect travel agencies and departments stores. Those with insight will go further and predict that eye doctors will also suffer since more hand washing will lead to fewer patients.”

Only hardworking fund managers can develop insight. They visit companies in person more than four times a week and 100 to 200 times a year. They also check on companies whose stocks they purchase once a quarter, and frequently meet with their CEOs.

Such instincts accumulated in the process become insight and they make fewer mistakes in investment decisions.

ING Investment Management CEO Choi Hong said, “Fund managers should be able to imagine that a stock worth only 20,000 won (17 dollars) can rise to 200,000 won (170 dollars) later with changes in industrial paradigm.”

A case in point is the stock price of Hyundai Mipo Shipbuilding, which jumped from 4,000 won (3.38 dollars) in 2000 to 390,000 won (330 dollars) at the end of 2007.

jarrett@donga.com turtle@donga.com